DESPITE nine years in the business, Singapore's top e-commerce platform Qoo10, with more than 30 per cent share of the market, is still in the red.
But turning profitable is on the horizon, founder and chief executive officer Ku Young Bae shared with The Business Times.
The 51-year-old entrepreneur (who started a similar venture in South Korea but has divested it) expects Qoo10 to stop bleeding red ink in the second half of 2020 - with an eye on an initial public offering the year after, to boot.
He declined to reveal how much the company is in the red, but disclosed that the 2018 losses are lower than 2017's as "our sales volume continues an upward trend coupled with quicker deliveries made possible" with its cross-border shipping unit Qxpress.
Qoo10 raked in US$60 million in revenue in 2018 from transaction fees and advertising income, derived from opening up ad spaces on high visibility spots of the Qoo10 platform for vendors to bid for.
However, it has not yet turned around because of expenditures on technology and promotions - including a loyalty programme and advertising - as well as wage costs.
Qoo10 had allocated 60 per cent of its resources (including staff and marketing dollars) to its Japan business in the past. Now that the segment was sold in 2018, the Singapore-headquartered company is doubling down on its efforts to capture the South-east Asian markets.
It has also launched a new service model QuuBe, which is positioned as a commercial-oriented version of Facebook and is therefore not limited only to selling activities.
Founded in mid-2010, Qoo10 did not see many serious players in the local e-commerce scene then, Mr Ku told BT.
The company had to develop the merchant base from scratch and educate them on how to be online vendors, including giving them tips on their product catalogues.
Because the market was nascent, the pool of merchants was small. Buyers, on the other hand, were not entirely engaged, and in fact were a little doubtful and suspicious.
But the firm had the time to build up the business and reaped first-mover advantage till 2016 when more rivals entered the fray.
While it has broken even a few times in the past nine years, profitability has not been sustained.
Mr Ku said: "For the company to make money, to be profitable, sustainable and scalable, I would say daily transactions numbers (need) to go above 100,000. We reached 100,000 a couple of times but not on (an) average basis."
Presently, the average is 50,000 transactions a day.
The company first hit 100,000 transactions a day in 2016. While it was a feat, the first time that it hit 10,000 transactions a day - in 2011 - was arguably a more important milestone, given that the number of merchants in the early days was too small to build up a critical mass and attract buyers.
Qoo10 started out with an aspiration to be a pan-Asian online marketplace. With Singapore as its base, it had planned to spread its tentacles to other Asian markets.
However, along the way, the company realised that it did not have the financial muscles of its competitors.
"For China, we found it basically too tough; it requires a lot more money than we can afford, because there's Alibaba and Jingdong (more popularly known as JD.com)," Mr Ku said.
Consequently, Qoo10 decided to focus on Singapore and Japan first. As a bigger market, Japan was doing very well for the company. In fact, business surged by 50 per cent in 2017.
But capturing the Japanese market would require further investments, and there are already three established e-commerce heavyweights there - Rakuten, Yahoo and Amazon.
With limited resources, the company could not afford to pour in more funds in both Japan and South-east Asia (SEA) simultaneously. Its then shareholder with a 49 per cent stake, eBay, preferred Japan while Mr Ku - who owned a 51 per cent interest at that time - was optimistic about the prospects of the SEA markets.
The partners decided then that eBay would buy out Qoo10's Japan business, following which Mr Ku and the American multinational company parted ways.
Presently, Qoo10 has only two corporate investors with minority stakes, one of which is Singapore Press Holdings (SPH) with a 5 per cent interest. SPH publishes BT.
With the divestment of the Japan business in the rearview mirror, Qoo10 is now reorganising itself and strategising as it sharpens its focus on the SEA market.
Qoo10 has localised marketplaces in Singapore, Malaysia, Indonesia, Hong Kong and China, with 8.5 million daily page views across all its marketplaces.
While Singapore has seen keener competition from entrants such as Lazada and Shopee in recent years, Mr Ku is unfazed and has a lot of faith in his company's strengths.
"Except that they can spend more on marketing and promotion, they don't seem to have anything (else) better than us. Overall, we are much more solidly established."
He believes that Qoo10's wide and diverse product selection, more cross-border merchant sources, a predominantly domestic vendor base, self-owned cross-border shipping network and price competitiveness would enable it to ward off business rivals and continue to be the leader in the Singapore market.
But Qoo10 is not resting on its laurels. It introduced a blockchain-based free-to-use e-commerce platform QuuBe in 2018 to tap SEA's unbanked majority who have little or no access to credit or debit cards.
QuuBe users will transact using Q*coin, a private blockchain-based token created for the platform.
In addition, the platform will leverage a widely-used feature of blockchain technology - smart contracts - that makes it possible to automatically and securely execute transfers of value between buyers and sellers.
This means that much less resources are needed to govern and manage the platform, making it possible for QuuBe to offer its platform for free, and virtually eliminating huge barriers of cost and capital that have discouraged many from offering their products online.
QuuBe will adopt Qoo10's model of creating advertising spaces within its website and app, and making these spaces available to merchants to bid for.